A reputation shredded: Sir Fred loses his knighthood

Ex-RBS chief executive pays price for role in the recession, leading to calls for others to be stripped of honours

The former chief executive of the Royal Bank of Scotland, Fred Goodwin, has been stripped of his knighthood by the Queen for his role in the creation of the biggest recession since the second world war.

With unceremonial haste, a committee of five senior civil servants took away the knighthood given to Goodwin by the last Labour government in 2004 for services to banking.

The chancellor, George Osborne, welcoming the move, said: “RBS came to symbolise everything that went wrong in the British economy over the past decade.”

The move provoked a cacophony of calls for honours to be stripped from other miscreant bankers, politicians and regulators. The campaign to humble Goodwin was reignited by the Daily Mail a fortnight ago and then hastily backed in a highly political move by David Cameron as he sought to show he will side with the public against crony capitalists and bonus-seeking bankers.

Normally an honour is only taken away if someone has been guilty of a criminal offence punishable by longer than three months in jail, or has been stripped of their professional status by their regulator.

Goodwin has suffered neither fate, but had been sharply criticised for excessive risk-taking in a report prepared by the Financial Services Authority in November into the RBS collapse.

He now joins an ignominious list of individuals stripped of their honours, including Robert Mugabe, the president of Zimbabwe, and Anthony Blunt, who spied for Russia. Goodwin has no right of appeal, and in accordance with custom was given no right to make representations to the forfeiture committee, a group of five permanent secretaries. The authority to rescind an honour rests with the Queen alone.

The unprecedented decision, and the corner-cutting in the procedures, helped fuel calls by Tory MPs for peers and other bankers to have their honours subjected to review by the previously obscure forfeiture committee chaired by Sir Bob Kerslake, head of the civil service.

Goodwin was telephoned by Kerslake in the afternoon to be told the news. In an unusual public statement, the committee justified its decision, stating: “The scale and the severity of the impact of his actions as chief executive officer of RBS made this an exceptional case.

“In 2008 the government had to provide £20bn of new equity to recapitalise RBS and ensure its survival and prevent the collapse of confidence in the British banking system. Subsequent increases in government capital have brought the total necessary injection of taxpayers’ money in RBS to £45.5bn.

“Both the Financial Services Authority and the Treasury select committee have investigated the reasons for this failure and its consequences. They are clear that the failure of RBS played an important role in the financial crisis of 2008-09, which together with macroeconomic factors triggered the worst recession in the UK since the second world war and imposed significant direct costs on British taxpayers and businesses.”

It added: “Fred Goodwin was the dominant decision maker at RBS at the time. In reaching this decision it was recognised that widespread concerns about Fred Goodwin’s decision meant that the retention of a knighthood for services to banking could not be sustained.”

The Conservative MP Mark Field called for the forfeiture committee to be given powers to strip peerages from miscreants, such as those peers found guilty of fiddling their expenses. He said: “I hope that now, if this committee feels so strong about Fred Goodwin, [it] will want to look at the various peers who have gone to prison, or who have abused their expenses.

“Let’s get them booted out of the House of Lords, they have a lifelong peerage and a place in our legislature. So I hope that we will now very rapidly move to getting these people expelled from the House of Lords. Because if we’re looking at the sanctity of honours, their abuse is far more serious than the mere bauble of a knighthood.”

David Ruffley, a Conservative MP on the Treasury select committee, said other risk-taking bankers and lazy regulators should also be examined. “We need to look at other parts of the City, business and politics. We are talking about honours given by her majesty. Members of the public should write into the forfeiture committee. This should not be a one political gimmick.”

The Conservative MP Matthew Hancock backed the forfeiture committee decision but called for the heads of banks responsible for systemic failure also to be subject to criminal gross negligence charges.

Political leaders rushed to welcome the decision, announced just as the prime minister was being scrutinised in the Commons over his diplomacy at the EU summit on Monday. David Cameron said: “The FSA report into what went wrong at RBS made clear where the failures lay and who was responsible. The proper process has been followed and I think we’ve ended up with the right decision.”

Ed Miliband said the decision should be the start of a wider reform of the culture of banking.

The CBI said: “The business community will understand the Queen’s decision to take away the knighthood awarded to Fred Goodwin for services to banking in 2004. Such an annulment is exceptional but unsurprising, given all of the circumstances.”

The CBI’s former head, Lord Digby Jones, said: “I think there is the faint whiff of the lynch mob on the village green about this, but that isn’t to say that the end result isn’t what is right.”

The forfeiture committee is chaired by Sir Bob Kerslake, the head of the civil service. The other members are Dame Helen Ghosh, permanent secretary at the Home Office, Paul Jenkins, the Treasury solicitor, Sir Peter Housden, permanent secretary of the Scottish government, and Sir Jeremy Heywood, the cabinet secretary.

David Fleming, Unite’s national officer, said: “It is a token gesture to strip Fred Goodwin of his knighthood, but one which will be well received by the thousands of workers who lost their jobs during his rule. Nonetheless this will do nothing to bring job security to the staff across the banking sector who continue to work under a culture of excess and greed at the top. Action from the government is needed in banking reform, not simply empty rhetoric on knighthoods or shareholder activism.”

RBS said it would not make any comment, but Sir Jackie Stewart, the former motor racing driver, was one of the few people to speak up for his friend last night. “The recession did come, it was a global recession – it wasn’t one man or one bank who created this,” Stewart said.